9. The nation’s economy. Gnp. Economic indicators.

Analyzing a national economy involves many factors, some of which cannot be measured by data. One measure of an economy’s success that helps planners to make prediction about the future of the economy is gross national product.

Economists study different sides of the economy in different ways. Microeconomics is the part of economics that analyzes specific data affecting an economy. Macroeconomics is the branch of the economics that analyzes interrelationships among sectors of the economy.

Microeconomists use various methods to measure the performance of the economy. Statistics measure gross national product, or GNP, which is the value of all goods and services produced for sale during one year. All the goods and services produced must be counted, and their value determined.

First, only goods and services produced during a specific year are counted. Second, not every good or service produced or sold during the year can be counted. For example, if both the flour the baker used and the bread produced were counted, the flour would be added in twice and so exaggerate the gross national product. To avoid this problem, economists count a product or service only in its final form. They count the baker’s flour in its final product form – as a loaf of bread or cake. Products in their final form are called final goods and services. Third, GNP includes only goods sold for the first time. When goods are resold or transferred, no wealth is created.

One way in which economists measure GNP is the flow-of-product approach. Using this method, they count all the money spent on goods and services to determine total value. Each time a new product is sold, GNP increases.

Spending for products falls into four categories. The first, and the largest, consumer spending, includes all expenditures of individuals for final goods and services. The second category includes all spending of businesses for new capital goods. The third category includes spending of all levels of government. The fourth category is net exports of goods and services.

Another way of determining GNP is the earnings-and-cost approach. This method accounts for all the money received for the production of goods and services, it measures receipts. To help predict expansion or contraction of the economy, government economists identified a number of indicators. They fall into three categories: leading, coincident and lagging. Leading economic indicators rise or fall just before a major change in economic activity. The leading indicators include information about the number of workers employed, construction activity, and the formation of new businesses. Coincident economic indicators change at about the same time that shifts occur in general economic activity. Lagging economic indicators rise or fall after a change in economic activity.

10. Money. Banking and monetary policy. Money: roles, forms, functions.

Most people use money every day. It is so common that many people rarely think about why money is important and what gives it value. In general, money is any item that is widely accepted as payment for products. It is something people see and use almost every day. Though money is commonplace, its forms and functions are complex. The familiar paper bills and metal coins are only two of the forms money can take. In the past, many things served as money – beads, shells, dog’s teeth, cattle, stones, tobacco, fishhooks and even slaves. Precious metals, especially gold and silver, have been a favourite form of money.

In most modern economies money serves several functions. As a means of exchange money is used to trade for goods and services. Less complex societies often do not use money at all. They simply barter, or trade, one product for another. Two farmers may trade a bushel of wheat for a jar of milk, for example. The more complex a country’s economy is, the harder it is to use a system of trading one good for another. Money is the answer to that problem.

As a store of value people use money to save their wealth for the future. Storing goods is not so easy as storing money. Many goods, such as food, spoil quickly. Others, such as cars, take up a lot of space. But money can be kept in a bank or a safe or a pocketbook until it is needed.

As a standard of value money is used to compare the worth of one product with that of another.

Sometimes, time deposits also are considered a form of money. Several other things are used like money. Economists call things used for some, but not all, of the functions of money near money. Credit cards, for example, allow a purchaser to borrow money from the seller of the purchased goods. Insurance policies, stocks, and bonds are stores of value and can be exchanged for money. They are other examples of near money.

Money is very important in our society. You have your own beliefs about the value of goods, services, jobs, and people. Often the value you place on an item will differ from its monetary value. You may feel that some things are priceless and others are not worth as much as they cost. Your own values dictate what you are willing to do for pay.